Les Moonves of CBS and Bob Bakish from Viacom are talking as the companies have made their requests for due diligence materials, the sources said. But the special committees of their boards have yet to meet.
Earlier this month, the boards of both companies said they had formed the special committees to explore a combination. Both companies, which are primarily owned by Sumner and Shari Redstone and split apart a decade ago, face a rapidly changing media industry. A deal could combine CBS's broadcast network with Viacom's cable channels and film studios.
Shares of CBS and Viacom were flat Wednesday.
He is seeking to stop the companies from completing their deal and to nullify their joint venture.
The complaint, brought by Deason's lawyers at King and Spalding, alleges that the Fuji-Xerox joint venture contains a "crown jewel lock-up right that allows Fuji to control Xerox's intellectual property and manufacturing rights in the $36 billion Asia-Pacific market in the event Xerox were to sell to another suitor."
Deason claims that this lock-up was concealed from shareholders for 17 years until the recent transaction with Fuji was consummated.
Deason also claims an accounting scandal at the Fuji-Xerox joint venture and an independent report that criticized Fuji for its prominent role in contributing to the matter gave Xerox the right to terminate the joint venture agreements.
Xerox said the allegations "are without merit." Fujifilm did not immediately respond to a CNBC request for comment.
The suit claims:
"The self-interested director defendants, however, ignored the opportunity or deliberately chose not to terminate the joint venture agreements. Had the director defendants terminated the joint venture agreements, they would have been able to engage in a fair and equitable bidding process and achieve a fair value and control premium for Xerox shareholders. Indeed, the value of Xerox as a standalone company with no encumbrances on its intellectual property and the licensing, manufacturing and selling of its products in the Asia and Pacific Rim markets is significantly greater than the value being provided to the company and its shareholders as part of the proposed transaction."
Japan's Fujifilm announced at the end of January it will buy Xerox for $6.1 billion and combine it into its existing joint venture. Deason and another Xerox shareholder, Carl Icahn, have been vocal about criticizing the combination.
Icahn and Deason said in an open letter this week the deal "dramatically undervalues Xerox and disproportionately favors Fuji."
"We urge you our fellow shareholders do not let Fuji steal this company from us," Deason and Icahn wrote.
In an email to CNBC, Xerox spokesman Carl Langsenkamp said:
"Mr. Deason's allegations are without merit and the company will vigorously defend itself. After having considered all strategic alternatives available to the company, Xerox's Board of Directors remains steadfast in its belief that the combination with Fuji Xerox is the best path to create value for the company and its shareholders. It is unfortunate that Mr. Deason is seeking to interfere with Xerox shareholders right to decide and is relying on meritless legal claims. Xerox has fully disclosed the joint venture agreements, and the company will respond to Mr. Deason's legal claims through the appropriate legal channels in due course."
Both companies said Thursday their boards had formed special committees to explore a combination, though an agreement is not a given. The deal is likely to be structured as CBS, with a market value of $22 billion, buying Viacom, with a market value of $13 billion.
The sources said the Viacom transaction is seen as CBS' only option, and the two sides hope to conclude talks this quarter.
A merger of the companies, which were split apart more than a decade ago by the media mogul Sumner Redstone, has been orchestrated by his daughter, Shari Redstone. It would combine CBS's broadcast network with Viacom's cable channels and film studios as the industry faces a big shakeup.
The two held prior talks to combine but ended them in late 2016 without an agreement.
ValueAct Capital, the $15 billion activist firm led by Jeff Ubben, is launching a fund focused on promoting environmental and social goals for the companies it invests in.
In a letter to ValueAct's limited partners, Ubben outlines a new effort for his firm built on the premise "that there is not just a societal good to be done, but excess return to be captured in identifying and investing in businesses that are emphasizing and addressing environmental and societal problems."
Ubben declined comment on the new fund, citing SEC marketing restrictions.
The ValueAct Spring Fund, as it will be known, is starting small with an initial target of raising $100 million, according to the letter. The VAC General Partner will contribute up to $50 million toward the new fund.
In recent weeks, environmental and social investing has become a focus after activist hedge fund Jana Partners unveiled its plan for a new Impact Investing Fund. Jana made headlines with a letter imploring Apple to do a better job of helping parent's monitor their children's cellphone use.
In addition, fund giant BlackRock and its CEO Larry Fink have sent a letter to CEOs outlining his belief "To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society."
In his letter to limited partners, Ubben expounds on his belief that there is money to be made by finding companies that either have, or plan to adapt, sustainable business models that enhance financial gain. As one would expect from a long-time activist, Ubben appears to be prepared to prod them to get there, writing that he "hopes to pull forward public company actions that have near term costs as well as future stock gains."
As an example, Ubben cites a food company that invests in a supply chain with local farmers who do not engage in deforesting, an investment prospect that he believes will be rewarded in the marketplace.
Earlier this week, ValueAct made its first investment in independent power producer AES, on whose board Ubben will now sit.